IMF: Asia May Stage Fast Recovery in 2010

By ELAINE KURTENBACH / AP WRITER

SHANGHAI — Asia's struggling economies will likely bounce back quickly once their trading partners begin to recover, the head of the International Monetary Fund said Tuesday, predicting a turnaround could come by late this year or early 2010.

For 2009, the outlook is still grim: the IMF's latest forecast for world economic growth is 0.5 percent, with advanced economies contracting by 2 percent.

"Those figures are the lowest rates we have experienced in the postwar period, so they really are rather gloomy," the IMF's managing director, Dominique Strauss-Kahn, said in a Web cast.

The IMF is encouraging the United States, China and other economies to expand economic stimulus programs to help counter the malaise from the global financial crisis, while also working to restore confidence in shattered banking systems.

"We forecast recovery in beginning 2010, and for some countries, the end of 2009," he said. "Those figures are very uncertain and it depends a lot on the policies that may be implemented in the coming days and coming months."

Strauss-Kahn said he does not expect export-reliant Asia to bounce back until its major markets revive, but once they do, the recovery could be quick.

The region has less exposure to the toxic mortgage-related securities that have wreaked havoc in the US and some other countries. Its banking systems are relatively healthy, and many governments have ample resources they can spend to help rekindle growth.

"A rapid recovery is possible," Strauss-Kahn said. "Some Asian economies are very good candidates to be the leading economies when things get going."

The IMF forecasts that South Korea's economy will contract by 4 percent this year. It expects China's growth to remain at a relatively strong 6.7 percent, though achieving the government's target of 8 percent could be difficult, he said.

While emerging economies are expected to outdo the advanced industrial nations, with growth at 3.3 percent this year, many poor countries are seeing the booms of the past few years stall. Strauss-Kahn urged rich donor nations not to give in to the temptation to slash development aid because of the financial crisis.

"This risk is a real risk we have to fight against," he said. "It's not because the richest countries are in a mess that we should forget our commitments to the developing countries."

Asked about "Buy American" provisions in economic stimulus legislation, Strauss-Kahn also urged leaders not to succumb to protectionism.

Seeking a domestic solution to a global problem is not an option in today's globalized economy, he said.

"There is no way to find a domestic solution for yourself without taking care of the others," he said. "We have to explain and explain again that a beggar thy neighbor approach will never work."